Home buying thread

Sanrith Descartes · Nov 8, 2020

So, I am from FL but currently live in NY. I wont do investment properties in NY due to the fucked up laws protecting renters/squatters. With the election I see the low interest rate environment being here for an extended period of time and am thinking I might start rolling in investment properties back in FL. Friend back there has 3 currently and has a management company running them for $80/month/property.

S Fla has tons of condos and that seems to be the starting point for lots of investors since they are a cheaper entry point. My thinking and my question is I don't know that I agree with this. Condo wont have the same property value appreciation as single family home and are also saddled with HOA fees which are just a straight expense to the bottom line. What do people here think of condo vs single family as rental properties. I am currently looking at Broward County as I know it inside and out.

Condo pros are lower insurance rates/taxes due to shared expense of the outer building and cheaper cost of capital to enter. Downside is lower price appreciation and an HOA that can vote to change rules that could hurt my business and the fees are a straight non-recoverable expense that hurts my profit.

Single family (assuming not in an HOA) pros are higher price appreciation, total freedom from non-government interference in the business, and greater variety of properties to choose from. Downsides included higher entry costs, higher insurance and taxes (especially the windstorm coverage) that cant be offset because I cant homestead the properties, higher maintenance costs.

I am also weighing the different location options. Option 1 is to pay more for a location that has great schools so I can charge more for rent, vs option 2 which is go cheaper and average school area with lower rent. Then option 3 is to go for lower income but non-hood areas and open it up to section 8.

I think avoiding a pool is the right choice as I dont want the increased maintenance and liability of it. Also weighing if I go single family, investing in storm windows/doors and roof to mitigate the windstorm insurance over the long term.

For those that have rentals, any thoughts and advice?

Poster · Nov 8, 2020

I think you have a good handle on the pros and cons of either option. I would lean condo vs SFR because of the amount of maintenance involved with houses. Your initial cash on cash return will be highest with Option 3 (lower income, with Section 8). Especially now with big rona and the shutdowns, Section 8 money has been rock solid. At my job, we've underwritten several portfolios of multis in the Bronx/Queens that were partially occupied by Section 8 tenants and partially market rate. The Section 8 collections were 100% every month dating back to February, while the market rate collections dipped to 40% in March and are in the 70-80% range now.

Anecdotally, a former co-worker of mine has 10-12 units in Lexington, KY across a few duplexes/triplexes/quads which are mostly Section 8-occupied. After he turned over the first tenants, he did some basic renovations (rip out all the carpet, put in nicer laminate faux-wood floors, new appliances, tile in the bathrooms, etc) to push rents up a bit and make the upkeep easier. His dad manages the properties as his "retirement" job and my co-worker put up most of the money to buy the assets. Careful tenant selection is important for Section 8, other than one or two bad apples (a girl who let her dog shit all over the house, another family who tried to put an above ground pool in the back yard) he hasn't had any issues b/c they don't want to run the risk of losing their Section 8 voucher setup.

You're a business owner right? You'll probably have to go through an actual bank loan approval process (unlike a FNMA/FHLMC underwriting), so having a real relationship with a bank will help smooth the process. I think my buddy got 70% LTV, 30 year amortization, 5 year balloon financing on his properties with a local credit union.

Somewhat related - one thing I've been looking at in particular is buying a bit of land upstate in the Catskills/Hudson Valley to develop a vacation "cabin" that will also double as an Airbnb property. There's a huge disconnect between the number of available Airbnbs that aren't complete trash and the demand for houses since the pandemic hit. Very back of the envelope, I could rent it out about 35-40% of the time and cover all expenses and debt service. The active management might be too much of a time sink though.

Sanrith Descartes · Nov 8, 2020

Poster said:
I think you have a good handle on the pros and cons of either option. I would lean condo vs SFR because of the amount of maintenance involved with houses. Your initial cash on cash return will be highest with Option 3 (lower income, with Section 8). Especially now with big rona and the shutdowns, Section 8 money has been rock solid. At my job, we've underwritten several portfolios of multis in the Bronx/Queens that were partially occupied by Section 8 tenants and partially market rate. The Section 8 collections were 100% every month dating back to February, while the market rate collections dipped to 40% in March and are in the 70-80% range now.

Anecdotally, a former co-worker of mine has 10-12 units in Lexington, KY across a few duplexes/triplexes/quads which are mostly Section 8-occupied. After he turned over the first tenants, he did some basic renovations (rip out all the carpet, put in nicer laminate faux-wood floors, new appliances, tile in the bathrooms, etc) to push rents up a bit and make the upkeep easier. His dad manages the properties as his "retirement" job and my co-worker put up most of the money to buy the assets. Careful tenant selection is important for Section 8, other than one or two bad apples (a girl who let her dog shit all over the house, another family who tried to put an above ground pool in the back yard) he hasn't had any issues b/c they don't want to run the risk of losing their Section 8 voucher setup.

You're a business owner right? You'll probably have to go through an actual bank loan approval process (unlike a FNMA/FHLMC underwriting), so having a real relationship with a bank will help smooth the process. I think my buddy got 70% LTV, 30 year amortization, 5 year balloon financing on his properties with a local credit union.

Somewhat related - one thing I've been looking at in particular is buying a bit of land upstate in the Catskills/Hudson Valley to develop a vacation "cabin" that will also double as an Airbnb property. There's a huge disconnect between the number of available Airbnbs that aren't complete trash and the demand for houses since the pandemic hit. Very back of the envelope, I could rent it out about 35-40% of the time and cover all expenses and debt service. The active management might be too much of a time sink though.

Thanks for the info. The county we are looking at has a reasonable number of duplex, triplex locations in lower income, non-hood areas. That is in our target range as well.

Khane · Nov 8, 2020

Just consider what hurricane season means for your investment property. If you're looking South Florida consider buying a condo on a nice private or resort golf course. Snowbirds pay big bucks for January through April for golf properties. COVID is inflating prices on those at the moment though. Funny how everyone being able to work from home means people are flocking to warmer climates because they no longer have to go into the office.

Sanrith Descartes · Nov 8, 2020

Khane said:
Just consider what hurricane season means for your investment property. If you're looking South Florida consider buying a condo on a nice private or resort golf course. Snowbirds pay big bucks for January through April for golf properties. COVID is inflating prices on those at the moment though. Funny how everyone being able to work from home means people are flocking to warmer climates because they no longer have to go into the office.

Thanks. I spent 50 years in Ft Lauderdale. Me and hurricanes go way back. As I keep reading I hadn't factored in that HOA fees for condos include the property insurance for the building and exterior so it isnt as worthless as I previously thought.

Khane · Nov 8, 2020

Being a landlord is not for everyone. I objectively hate it. But It has also made it possible for me to be completely debt free. I paid off the last of my debt at age 36. Including the mortgage on the rental property. So there's that. But fuck I hate being a landlord.

Sanrith Descartes · Nov 8, 2020

Khane said:
Being a landlord is not for everyone. I objectively hate it. But It has also made it possible for me to be completely debt free. I paid off the last of my debt at age 36. Including the mortgage on the rental property. So there's that. But fuck I hate being a landlord.

My friends usee a property management company who charges 80 a unit per month to handle rent, complaints and shit. Seems like its worth the money to me.

Khane · Nov 8, 2020

Is that a price you can get on a single unit because uh.... that's dirt cheap. It's between 7 and 10% of monthly rent up here. Most of them also phone the job in completely.

Sanrith Descartes · Nov 8, 2020

Khane said:
Is that a price you can get on a single unit because uh.... that's dirt cheap. It's between 7 and 10% of monthly rent up here. Most of them also phone the job in completely.

I dont have 1st hand knowledge but my friend has 2 units rented and uses them and hasn't had any complaints so far. I'll double check the amount in case I misremembered it.

LachiusTZ · Nov 10, 2020

God property MGMT is awesome, bad can bankrupt you.

I've had both.

moonarchia · Nov 11, 2020

LachiusTZ said:
God property MGMT is awesome, bad can bankrupt you.

I've had both.

Know any decent property mgmt companies in the Denver area? Asking for.... a friend.

lurkingdirk · Nov 11, 2020

I have a full time guy that manages my properties. He's amazing. I can disappear for weeks on vacation if need be, and he never fucks anything up. I still insist on meeting my renters in person before any lease is signed.

LachiusTZ · Nov 15, 2020

moonarchia said:
Know any decent property mgmt companies in the Denver area? Asking for.... a friend.

I'm not sure if I did I would say.

Rather not have you be the bad experience and come here with "Lachius bankrupted me!"

That would bum me out

The one I know is in Memphis. And nobody should buy property in Memphis

moonarchia · Nov 16, 2020

LachiusTZ said:
I'm not sure if I did I would say.

Rather not have you be the bad experience and come here with "Lachius bankrupted me!"

That would bum me out

The one I know is in Memphis. And nobody should buy property in Memphis

It's all good. I might have to rent my condo out if it doesn't sell, so I am looking.

Araysar · Nov 26, 2020

What's a good rate for 30 year fixed these days?

I was offered a 2.25% on a 600K loan which seems really good but wondering whether I should keep shopping around.

We're looking at townhomes in Orange County (leaving California didn't pan out) -- anything particular about townhomes I should know about vs. other property types (SFH, condo, etc.)?

Burren · Nov 26, 2020

Hell of a deal. But even if I got a 0% interest rate, I'd leave CA. and at best rent the place out.

Sometimes HOAs in townhouses, sometimes not. I never liked shared walls. You might be limited on what changes you can make, according to the association (if there is one) because they want continuity.

Sanrith Descartes · Nov 26, 2020

Araysar said:
What's a good rate for 30 year fixed these days?

I was offered a 2.25% on a 600K loan which seems really good but wondering whether I should keep shopping around.

We're looking at townhomes in Orange County (leaving California didn't pan out) -- anything particular about townhomes I should know about vs. other property types (SFH, condo, etc.)?

That is a good rate for a loan that large. The secret to getting a good rate is to shop around without letting anyone pull your credit report and get a bunch of GFE (good faith estimates) and walk through all the closing costs. Have your credit score handy and say "assume its this". Mortgages use a slightly different score than the normal fico so it might end up a bit lower than you think based on the available fiction. If you aren't familiar with calculating points do some reading and you have to have decided how long you plan to stay. Closing costs can vary widely so you aren't just shopping rate, you are shopping costs.

Finally dont just use big banks. Local banks and especially credit unions tend to have lower rates. Credit unions have a tax break big banks dont so they can offer a lower rate generally.

Sanrith Descartes · Nov 26, 2020

Burren said:
Hell of a deal. But even if I got a 0% interest rate, I'd leave CA. and at best rent the place out.

Sometimes HOAs in townhouses, sometimes not. I never liked shared walls. You might be limited on what changes you can make, according to the association (if there is one) because they want continuity.

HOA's generally suck but at least they stop the neighbors from painting their house hot pink/purple.

If you are doing an HOA you need someone (if you cant) to go through their books and make sure they are solvent and have a decent cash reserve set up or you can have a nasty surprise down the road.

Araysar · Nov 26, 2020

Burren said:
Hell of a deal. But even if I got a 0% interest rate, I'd leave CA. and at best rent the place out.

Sometimes HOAs in townhouses, sometimes not. I never liked shared walls. You might be limited on what changes you can make, according to the association (if there is one) because they want continuity.

HOA is $300. You'd be hard-pressed to find anyone who hates HOAs and HOA fees more than me, but I grudgingly admit that you're getting a lot of amenities here. There's a whole shopping center, hotel style pool, brewery, coffee shop, typical outdoor mall galleria built into and adjacent to the complex.

The plan is to stay for a bit until we find something that works well for both of our careers long term and then either sell the place or rent it out and leave California. I think the current plan is to stay here for a at least a year or 2.

Araysar · Nov 26, 2020

Sanrith Descartes said:
That is a good rate for a loan that large. The secret to getting a good rate is to shop around without letting anyone pull your credit report and get a bunch of GFE (good faith estimates) and walk through all the closing costs. Have your credit score handy and say "assume its this". Mortgages use a slightly different score than the normal fico so it might end up a bit lower than you think based on the available fiction. If you aren't familiar with calculating points do some reading and you have to have decided how long you plan to stay. Closing costs can vary widely so you aren't just shopping rate, you are shopping costs.

Finally dont just use big banks. Local banks and especially credit unions tend to have lower rates. Credit unions have a tax break big banks dont so they can offer a lower rate generally.

We're planning to stay maybe 2-3 years in that townhome. At that point we're hoping to have more clarity and better options for leaving the State.

I went through LoanDepot and was offered a 2.75%. seemed OK but not great. Called my buddy up who is a loan officer at a mortgage company in Florida ( btw if youre looking to borrow to buy property in FL let me know if you want his info) and he had a pre-approval letter to me in 24 hours with a 2.25%

He suggested having the seller cover some of the closing costs even if it means making a larger offer on the house, apparently that's a thing. Anyone familiar with that?

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